Aegon: Bank property disposals to have little market impact

The disposal of distressed UK property by banks will have little impact on the property market.


Cockburn, a property fund manager at Aegon, said any potential impact will be diluted by the drawn out timeframe and the highly confidential nature of the process.

“It is clear that many banks are seeking to reduce the size of their property loan books, with RBS, Lloyds Banking Group and Ireland’s National Asset Management Agency likely to be major contributors to this process,” said Cockburn, who added that she believes banks will look carefully at loan serviceability before making decisions to sell.

Cockburn added that sales have been steadily coming to the market as a combination of portfolios and individual asset sales.

“Much of the prime stock on their loan books was dealt with early on, and the majority of what is left is secondary and tertiary,” she said. “We expect to see banks increasingly packaging up saleable assets into portfolios towards the end of this year and early 2012.”

Furthermore, Cockburn said the banks will be conscious of the fact that, if they flood the market, it could be detrimental to their portfolios as it will drive down prices.

Matt Jarvis, manager of Legal & General Investments’ UK Property Trust, agrees and says banks have found other ways of reducing their property portfolio stock.

“To reduce their property exposure banks have been selling on the loans themselves rather than the physical holdings” said Jarvis.

“As a result, the exposure banks have to direct property is falling as a proportion of their loan books. Consequently, this has reduced fears of a flood of assets entering the market.”

However, Jarvis does warn that other factors, such as Basel III – a new global regulatory standard on bank capital adequacy and liquidity – means new availability of finance will still remain challenging.


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